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The WIFO Model for Medium-term Sectoral Forecasts

Listed author(s):
  • Kurt Kratena
  • Michael Wüger


This paper presents the results of the second stage in building a model for sectoral forecasts, an input-output model (I-O Model) that is fully compatible with the WIFO Macro Model. The first stage was completed one year ago, and the following changes were then implemented: the data base of the official I-O Table 1983, that has since become available was incorporated into the sectoral model; the structure of the technical coefficients was dynamized; the structure of final demand was modeled econometrically. The old I-O Model was based on the preliminary I-O Table of 1988. The official Input-Output Table of 1983, that has become available last year, is a detailed representation of Austria's economic structure; it has served as a basis for dynamizing the interdependence between intermediary inputs. More recent statistical information regarding changes in demand for intermediary inputs was used to adjust the economic structure. For forecasting purposes, the development during the period 1983-1992 was extrapolated, with growth rates assumed to decline. Econometric modeling techniques were applied to imports, private consumption, and exports at a disaggregated level. Single equations were estimated for imports at a level of disaggregation that corresponds to the 19 categories of goods used in the I-O Model. For private consumption, a system of equations of the type "Almost Ideal Demand System" (AIDS) was estimated. For imports as well as for consumer demand, error correction mechanisms were specified. These specifications allow short-term effects to differ from long-term effects. Single equations at the two-digit level of the Austrian industrial classification system (altogether 50 positions) were estimated. Given the lack of detailed official price statistics in foreign trade, this work required the computation of price indices for all foreign trade flows. Investment and public consumption were extrapolated by means of largely fixed coefficients in the commodity structure. Equations modeling labor productivity, with different trends for technical progress, provide the link to sectoral employment. This model allows medium-term forecasts on output and employment for 19 sectors of the Austrian economy, fully consistent with the macroeconomic forecasts. The model can also be used to analyze the impact of economic policy measures or of shocks on individual sectors.

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Article provided by WIFO in its journal WIFO-Monatsberichte.

Volume (Year): 68 (1995)
Issue (Month): 9 (September)
Pages: 593-601

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Handle: RePEc:wfo:monber:y:1995:i:9:p:593-601
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